Oct 9, 2008 0
Required reading for these times…
Something of a required reading for these times… be it point or counterpoint.
No, we’re nowhere near a depression but forewarned is forearmed as they say…
Oct 9, 2008 0
Something of a required reading for these times… be it point or counterpoint.
No, we’re nowhere near a depression but forewarned is forearmed as they say…
Oct 1, 2008 1
I’m sure that you’re drowning in the much bandied about term – Credit crisis or Credit crunch or liquidity crisis or the like. And I’ve come across some explanations of what event or series of events underlie this crisis. For a very good explanation of the problem and the failed bailout by the current Treasury Secretary Paulson, I refer you to this site – Understanding Tax.
As I pointed out in the previous post – Are you ready for the Supply Chain Shock?, a credit crisis is not a laughing matter and a serious credit crisis will send numerous shocks through the numerous supply chains of the world. The author of the article also points that out,
You might think of short-term money as the lubricant that keeps the world’s economic engine turning over smoothly. If there’s no lubricant,the engine freezes. No paydays, no goods on the shelves. Seriously.
So what is the purpose of the bailout bill? Let’s be clear about the probable scope of the current crisis – it’s not going away tomorrow if the bill is somehow passed in the House.
Note that Mr. Paulson’s proposal was not intended to solve the teaser-rate mortgage problem, either now or in the future. In the transactions that created the teaser-rate mortgages in the first place,both parties made bad decisions – the lender and the borrower. Mr.Paulson’s proposal was not intended to help either. One of its unavoidable side effects, however, was to relieve lenders of the consequences of their bad decisions, while leaving borrowers to suffer the consequences of theirs. This made it politically less palatable.
In addition, at least $500 billion more of teaser-rate mortgages are scheduled to reset over the next several years. In all likelihood, they too will go into default and become toxic waste. Nothing in Mr.Paulson’s original proposal was intended to do anything about this next$500 billion installment – or, indeed, to prevent lenders from making more teaser-rate mortgages in the future.
Similarly, Mr. Paulson’s proposal was not intended as a general Wall Street bail- out, although to some extent it would have had that effect.Note that the outstanding overhang of credit default swaps alone is estimated to be between $45 and $60 trillion – three to four times the size of our annual gross domestic product. The requested $700 billion, although the single biggest appropriation request in U.S.history, was miniscule when compared with the toxic waste problem as a whole. Mr. Paulson’s proposed solution was to cost just 1% of the size of the problem and was aimed only at a small part of that problem. (It is unnerving to realize that the U.S. government – the
Sep 30, 2008 1
My apologies for the dip in blogging frequency but I was delightfully detained by the birth of my daughter – Mikayla Sara Abraham last Monday. What an interesting world she inherits in but a week’s time?
If you’re glued to the Dow/Nasdaq/S&P 500, let me ask you whether you’re equally glued to your supply chain cockpit i.e. if you have one? Regardless, if there is going to be a Supply Chain shock that is a consequence of tightened credit requirements, what is your plan, your firm’s plan for dealing with the fallout? Since offshoring and outsourcing have created a manufacturing base overseas, the impact of tightening credit requirements will not only be felt stateside but at all points along that financial supply chain.
If there is a shock that has been building up in your supply chain – for example, a supplier that might be facing a hard time raising money for his/her continuing operations for whatever reason – then you can be sure that this shock will be transmitted into you material flow supply chain at some point in the future. What if a supplier just closed shop because he couldn’t pay his payroll any longer and they were a single source supplier? Time to get busy finding another source before that become a real problem, you’d think? But perhaps your firm is the problem for your suppliers and your own delays in making good on payments to suppliers squeezes their cash flow sending them into a downward spiral – internal improvements would need to be made after assessing which of your suppliers might benefit the most in this regard. In some cases, your firm might even need to step in as a guarantor in the relationship between a supplier and the credit facility – be it local or global. This is a time for building close relationships with every facet of your supply chain that has the potential to cause serious disruptions within.
Also, since the transportation lead time is for most firms (I mean those that have gone the outsourcing route) a fixed quantity right now – given that one has to factor the average shipping, drayage etc on average and one cannot really change this without forking out more in transportation costs and given that one has to hold the larger inventory over this additional lead time, any improvements to driving down the magnitude of this inventory as well as improving inventory turns should free up working capital for continuing operations.
While oil is the physical commodity that greases the global supply chain and you might not have liked the era of soaring oil prices and how it affected your margins if you were not able to pass on the costs to consumers, credit is the real handshake that enables the global supply chain – the current credit squeeze makes the handshaking that goes on everyday (that needs to continue to go on into the future) a little less forthcoming. Anything that you can do to free up working capital in your firm such as speeding up material to cash conversion can only help but more importantly planning for it now (or hopefully, some months ago) will give you an edge no matter which way this ill-wind blows.
Update: If you wanted a recent news article that describes the relationship between credit markets and continuing business operations – Banks in miser mode send borrowing rates soaring.
Tags: SCM, Credit squeeze and the Supply Chain, Credit squeeze, Improving cash flow, Supply Chain shocks
Sep 4, 2008 0
The first rule, on activities, states that
Aug 19, 2008 0
In praise of mavericks is a short piece by Col. Michael Wyly (Ret.) that can be found at the Armed Forces Journal. The byline reads –
A true professional will strive to do something, not be someone
The colonel’s principal interest is in a single word – professional, in brief terms – the development of the profession and the professional.
It was during the European Renaissance that the professional class emerged and defined itself. It was during the Renaissance that the birthright nobility began to give way to a society led by persons respected for their merits – for what they did instead of who they were. Each profession had standards for entry, they professed something, and their study of it was daily, continual and life- long.They served their society. Medicine, law, the clergy and military leadership became during the 15th and 16th centuries – and still stand as – the classically defined professions.
A profession must be applied for and joined after being accepted,and its moral standards are as important as its philosophy.
So it follows that I ask myself this same question – What is my profession? What professional am I? And the surest answer is that I am not in any profession – of many professions but not in any one. And I don’t find that as troubling as I normally might. Or should I?
Some of the Secretary of Defense’s remarks invoke another Air Force Colonel John Boyd, the OODA loop etc. It has been a long standing desire on my part to study the OODA loop and possible adaptations to what I do everyday. Or maybe the OODA loop itself is the desire.
After they graduate and leave Maxwell, Gates warned the students:
Aug 15, 2008 0
JDA is all set to acquire i2 Technologies for approximately USD $346 million – the huger for scale is relentless, it seems but whether or not it succeeds is a different matter altogether.
Aug 13, 2008 1
In this part of The New Economics of Semiconductor Manufacturing, an article that you can find at the IEEE Spectrum site, I mean to look at the specific claims and experiences that the authors of the article had in their TPS consulting journey at the unnamed IDM. The following are the four specific "distilled" rules (that earlier Harvard researchers have conducted research on – Decoding the DNA of the Toyota Production System. My own foray into this matter is in this review – Toyota, Toyota